Reduce currency risk from exposure to international assets.

Investment Objective:

The objective of passive hedging programmes is to reduce currency risk arising from exposure to international assets.

Key Features:

  • The amount of currency exposure in the portfolio is targeted, in line with the client’s risk appetite
  • Operational efficiency through managing the settlement and reconciliation process with custodian banks and/or prime brokers

Benefits:

  • Reduce the volatility of returns in an international asset portfolio
  • Use of a panel of global counterparty banks to achieve “best execution”
  • Efficiency of cash utilisation through provision of Equitisation or Bondisation service

Currency risk within international portfolios*

Passive Currency Hedging Graph

What Makes Us Different:

  • Transparency and efficiency of execution to ensure a very low cost solution for clients (with no hidden costs or execution fees)
  • Bespoke operational and rebalancing systems designed to efficiently manage passive portfolios
  • Management of counterparty bank credit rating thresholds on a client specific basis
  • Notifications to clients of potential cash flows ahead of currency forward contract expiry dates if required
  • Specialist consultation and advice regarding appropriate hedge ratios for client portfolios

 

*International Equity Portfolio (Risk Statistics)

Equity Risk is the annualised standard deviation of monthly returns on the hedged MSCI World ex-USA Index (in which international currency exposures are fully hedged back to US dollars).  


Currency Risk is the annualised standard deviation of monthly currency returns in the MSCI World ex-USA Index. Currency returns were calculated as the difference between the returns of the hedged MSCI-World ex-US Index and the unhedged MSCI-World ex-US Index.

 

MSCI World ex-USA Index

The MSCI World ex USA Index captures large and mid-cap representation across 22 of 23 Developed Markets (DM) countries, excluding the United States.  The MSCI World ex USA Index consists of 22 developed market country indices (Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK).  The index is based on the MSCI Global Investable Market Indices (GIMI) Methodology—an approach to index construction that is intended to allow for meaningful global views and cross regional comparisons across all market capitalization size, sector and style segments and combinations.  This methodology aims to provide coverage of the relevant investment opportunity set with an emphasis on index liquidity, investability and replicability. The index is reviewed quarterly—in February, May, August and November.  The index is rebalanced semi-annually. 

 

International Bond Portfolio (Risk Statistics)

Bond Risk is the annualised standard deviation of monthly returns on the hedged JP Morgan GBI Global ex-US Index (in which international currency exposures are fully hedged back to US dollars).  


Currency Risk is the annualised standard deviation of monthly currency returns in the JP Morgan GBI Global ex-US Index. Currency returns were calculated as the difference between the returns of the hedged JP Morgan GBI Global ex-US Index and the unhedged JP Morgan GBI Global ex-US Index.

 

JP Morgan Government Bond Indices Global ex-US Index

The JP Morgan Government Bond Indices ("GBI") Global ex-US Index is an unmanaged index representative of the total return performance in US dollars of major non-US bond markets. The JP Morgan Government Bond Index measures performance and risk across international fixed income bond markets.  The indexes, including the JP Morgan GBI Global ex-US Index, measure the total, principal and interest returns in each market.  

Solutions


Risk Mitigation


Manage Exisiting Risk


Absolute Return


Passive Currency Hedging

Who we are

Founded in 1994, we are an independent institutional asset manager based in London specialising in currency investment management for institutional clients globally.
Contact us to discuss your requirements.

What we do

We provide currency management solutions including risk mitigation strategies, active management of existing risk, absolute return products and advisory services.
Learn more.